Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Chilting , one point to remember is that many shorts are leveraged, they borrow on credit and hope for a short-term profit, a study of short positions shows that they are often held for no more than weeks or maybe a few months, as credit cost rise with interest rates the cost of time grows and hence the temptation to cut losses. (see the book "The price of time " by Edward Chancellor for a fascinating account of the phenomenon)
Not now but I can imagine a scenario in which MKs would buy out OCDO's stake in the JV . They bought a 50% stake at £750 mill(with targets hit)and a £500 mill down payment in 2019 see
https://www.investegate.co.uk/marks---38--spencer-grp--mks-/rns/m-s-and-ocado-announce-new-joint-venture/201902270700062430R/
They may still have to pay some of the committed £190 mill if those targets are fully hit (tho' looking unlikely.
Rumours of MKs buying out the rest of the JV come up now and again see
https://www.reuters.com/business/retail-consumer/reports-ms-raising-ocado-retail-stake-are-pure-speculation-ocado-cfo-2021-12-14/
I expect such a transaction to occur eventually but now is perhaps not the time, 'cos I guess MKS don't want to raise more cash through the markets and OCDO know that the value of the JV is at a low point.
Walts I have never been invested here but popped up recently to warn investors of the dire circumstances.Looking for Joules accounts I find a disturbing lack of reporting and exceptional vagueness in stock exchange communications ( a big red light IMV). However from the last reliable data I have discovered (February's interims) I see that joules had assets of £190 mill and liabilities of £140mill, on the surface not too bad BUT those assets include £61 mill inventory(now in a distressed situation worth far less), £30 mill of goodwill and intangibles and right of Use assets of £28mill. If you look up those latter two categories you will find that they are accounting conventions rather than real cash assets. SO in reality Joules' liabilities will far exceed any tangible assets on which they can raise money. They are effectively broke , indeed even creditors way above shareholders in the queue will get nothing.
While there was no detail in the Autumn statement re the relaxation of the current solvency2 regime , the documents now published and is here
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1118359/Consultation_Response_-_Review_of_Solvency_II_.pdf
A quick scan suggests that the proposals I mentioned yesterday are to be introduced to allow investments in infrastructure projects, to ease reporting for minor portfolio adjustments, to introduce a finer grading of risk assessment and to simplify procedures.
Once digested and implemented I expect it to be positive for insurers and for the funding of large-scale infrastructure projects in the UK by Uk-based pension funds and their agents (ie LGEN).
I'll be amazed if there isn't some variation on a windfall tax on both oil producers and energy suppliers. If this current gov. has learnt anything it must be that there is a general acceptance that revenue must be raised and that those are the obvious candidates, I am positioned to buy if, as I suspect, there is a sharp negative SP reaction to that news. IMV markets are still very sensitive and nervous and those like me who are willing to pick up stock on initial potential over-reaction will profit as/when a recovery, even if mild, takes place.
I will watch Shel/ Centrica/JWG/SSE .......also maybe a bit of fixed interest if the bond markets throw another wobbly(unlikely tho').
Joules is a parrot,
Courtesy of Monty Python:
C: I'll tell you what's wrong with it, my lad. 'E's dead, that's what's wrong with it!
O: No, no, 'e's uh,...he's resting.
C: Look, matey, I know a dead parrot when I see one, and I'm looking at one right now.
O: No no he's not dead, he's, he's restin'! Remarkable bird, the Norwegian Blue, idn'it, ay? Beautiful plumage!
C: The plumage don't enter into it. It's stone dead.
See this from Reuters:
https://www.reuters.com/business/finance/britains-insurers-become-test-case-post-brexit-unshackling-2022-11-16/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=global-investor&utm_term=Reuters%20Global%20Investor%20-%202021%20-%20Master%20List
While I suspect that we won't hear anything concrete about this tomorrow (two "budget-induced market panics "would be catastrophic) I do think progress in freeing up the enormous amounts of capital tied up by the EU's solvency rules is coming , to some degree and in the not too distant future. If/when it does the freedoms will allow LGEN and others to make better long-term use of the significant capital stocks they hold they hold and to generate better returns than the low/medium single figures available from present options. The UK's recent history is littered with examples of foreign entities with more capital allocation freedom, funding, buying and benefitting from the revenue streams from real estate, roads, airports, railways and utility suppliers.I will hold here in the expectation that changes will eventually be made.
Key points :
The last couple of years have been about positioning for the migration to a cloud-based service(provided by the Microsoft Azure product- for which incidentally one of my kids was until recently a consultant seller ). The major costs incurred by the transitioning planning/execution are behind us and the migration is going very well.
Market rationalisation (ie exiting some low-growth markets, is almost complete) and the focus on English-speaking markets is providing rapid, profitable growth - North America up 40%, that market is less affected by oil costs and is a tight labour market and rapidly growing labour cost hence the need for automation of systems. Sage expect continued good progress.Also growing strongly in France and Germany
In response to questions, no recent drop off in growth, the last four quarters all ~3.5% - 4%
Forward guidance strong, and many customers now cloud-based are enquiring about additional services. Many SMB's with manual systems seeking to automate to cut rapidly growing labour costs.
The atmosphere was very positive from both company and analysts , IMV another year (or more ) of strong growth in prospect, forward guidance unchanged, expect a number of analysts upgrades, I will be adding.
I've just come off this morning's call and it was strikingly positive, as borne out by today's SP bounce. Got stuff to do but will post some details later, all in all very good set of results and very positive forward guidance.
I too sold a chunk ~33% of my holding yesterday at 876p BUT that does not mean I have doubts about OCDO's medium-term prospects, merely that (for the third time this year ) I have cashed out a 30% + profit, yesterday's was actually about 50% (achieved in a few weeks!!)above my current average. I have said on this board and others that I am by nature a LTH. , however, in today's volatile markets it is ,IMV, wise to pocket cash when on offer. My belief is the enormous influence of trackers ETF's and HFT shops is creating extreme volatility. I have been an investor for almost 30 years and find that going with the flow ,buying low and selling high is working and that same volatility is offering sharp short-term profits for the sensible .Whether this situation is transitory and merely a reflection of higher than usual market stresses remains to be seen , in the meantime I have, to some degree, abandoned some of the principles by which I have operated for many years.
See this for where shareholders stand in a liquidation, which this is pretty certain to be,
https://harperjames.co.uk/article/who-gets-paid-first-in-insolvency/#:~:text=In%20liquidation%2C%20creditors%20are%20paid,Expenses%20of%20the%20insolvent%20estate
scroll down to "WHO GETS PAID FIRST......
There is no benefit to prospective buyers in rescuing the company as it is, the brand name, assets... may be saved, or as with Made.com only the brand. Whatever the outcome shareholders still invested must assume a zero value for their shares.
HI smasher, my assumption is that the workforce~100k? is fairly evenly spread over the age groups , so let's say minimum age 25? maximum 60+. I that is true then each year there are about 2000 or more reaching retirement age. If they are not replaced then the workforce dwindles by that number, so BT does not need redundancy programmes or early retirement to manage numbers down. Does your knowledge offer a different picture?
Jansen set to compromise.
"Now that we know that the extra energy costs are capped at £200m until the end of March – I didn't know that in April – I know we will do something. It will be targeted at those who need it most."
Quoted from an " all staff video call".
Looks like compromise is on offer, down to unions to respond/negotiate.
IMV not entirely a good thing in the short term but as I have said before, natural attrition will reduce the workforce by 2/3/4% pa for the medium term. Expect to see 10-15k less employees within 5 years , wage bill falling slightly more as I would guess those higher on the payscales go.
The FT article by John Ralfe needs to be taken in context- that context is that JR has been making the same argument for almost 20 years - he left his position in Boots(See:
https://www.ipe.com/ralfe-to-leave-boots-after-clashes/15706.article
after a disagreement about the structure of their pension fund, his position then , as it is now, was to be anti the now widely used and equally widely accepted principles of a move to bonds from the "risks" of equity investment and the innovation of LDI based investment strategies to match liabilities and assets over the long-term. He is a private pensions consultant who has held a minority view which this article seeks to demonstrate was right all along. Notwithstanding the recent events, the pensions market is still convinced that a hedged, bond-based solution is the right one. The recent scare following an unprecedented 100+ basis point move in gilt yields, was IMV, an anomaly unlikely to be repeated and as I have posted before rising gilt yields are good for pension funds in the longer term.
Look (IMV) surprisingly good, revenues rising , particularly in clothing , debt under control, the OCDO tie-up losing money (but only just )and assuming the usual pattern of a better second half the prospect of a PTP of ~£400mill.Will read more thoroughly to see if there are any hidden nasties, but at first viewing I would say OK.|
Market reaction? who knows??
Hi Crossley....jason w spent a few minutes playing down the divi prospects among quotes were"long term sustainability of divi......No overdistribution...., divis must be WELL COVERED....and sustainable." He also said that last June's 110p cost PSN £350 mill and that current cash was £700 mill... so my assumption is 2X cover £300mill on divis..... ergo £1 +/- 20% last the total payout for next FY.
All depends upon the state of the market , cost of cladding, volume and value of sales!!!!
I listened to this AM's analyst call and summarise the main points below:
This was as near to a "kitchen sink " call as I've heard in ages, the board members were brutally honest about the state of the market , the compromises being made, the allowances for the building safety bills arising out of Grenfell... the slow down in mortgage approvals,price cuts to clinch deals, the impact end of "help to buy"and risaaing mortgage rates (latest figs reducing from 6.99% to 6.19% in the last week or so) .........
Specifically they are forecasting a sharp reduction in land purchases, a significant cash allocation for the remedial fire safety work, price cuts (currently ~2%) to clinch sales,50 cancellations per week, sales running at ~200-220 per week , half of last years averages.
Still they quoted an average house sale price of £350k which achieves a 30% margin and confidence that they were on top of issues and foresaw a sticky period over the next six months before a return to normality.
I was reasonably re asssured by their grasp of the situation as were most of the other guys on the call.
I don't expect further sharp sp falls from here unless we have some major bad news, net cash is around £700 mill and tight cash control and a sharply reducued divi mean that PSN's medium term outlook is fraught but not critical. I hold and will continue to hold and add at these or lower levels , confident that the sp will progresss, if not over this winter then within 12-18 months . i expect annual divi's in the range 80-120p next year, fully covered.